Melbourne Airport has received approval from the Australian Government to undertake a $400m redevelopment under the Southern Precinct Program.
Carried out as part of the airport's $10bn investment programme over the next 20 years, the major development plan will move ahead after finalising negotiations with airlines.
Melbourne Airport CEO Chris Woodruff said the Southern Precinct Program will be an important step in the continuing development of Victoria's aviation gateway.
"The projects, which are being driven by strong domestic passenger growth, will build on Melbourne Airport's role as an employment centre, and will also provide the Victorian economy with a significant boost through the construction period and ongoing operation," Woodruff said.
"We will look to finalise discussions with our airline customers with a view to the terminal being operational by mid 2015."
The initial phase of the project includes addition of a new domestic terminal with a passenger handling capacity of ten million per year and the construction of 17 new aircraft parking aprons in addition to associated taxi-lanes, new taxiways and road upgrades.
The new terminal will meet growing demand for air travel in Victoria and Australia to cater for an anticipated rise in passenger traffic from the current 29 million to 64 million by 2033.
Development under the initial phase of Southern Precinct project is expected to be completed by mid-2015.
The airport is also planning to build a new third runway, which is expected to be operational by the end of the decade.
The Southern Precinct Program, which was earlier indicated in the Airport's 2008 Master Plan, was approved following an extensive community consultation in March and April 2012.
Image: The new domestic terminal would assist Melbourne Airport in handling future passenger traffic growth.